The suspension of trading on the New York Stock Exchange for more than four months following the outbreak of World War I fostered a substitute market on New Street as a source of liquidity. The New Street market suffered from a lack of price transparency because its transactions were not disseminated on the NYSE ticker and its quotations were blacklisted at the leading newspapers. This paper shows that despite the impaired information flow and the somewhat wider bid-ask spreads compared with the New York Stock Exchange, New Street offered economically meaningful liquidity services. The absence of price transparency turned an individual stock’s reputation for liquidity into an important variable in explaining the structure of bid-ask spreads on New Street

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.

The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain. Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html